Ferrari's Electrification Journey

This is Dom Cooke. Today we are breaking down Ferrari. Ferrari was founded in 1929 as a race team by Italian driver, Enzo Ferrari, but it wasn’t until 1947 when Enzo was 50 that Ferrari sold its first car. Today, the car company is one of the most recognizable brands in the world, in large part because of its history in Formula 1, where it is both the oldest and most successful team ever.

To break down Ferrari, I’m joined by Brian Lum, an Investment Manager at Baillie Gifford. We discuss how Ferrari went from racing team to a $70 billion business, the various ways it looks more like a luxury goods company than a car maker, and how its business model both nurtures and monetizes its famous red brand. There aren’t many things money can’t buy, but in many instances, a Ferrari is one of them. The ways in which the company manufactures scarcity are fascinating, and this conversation dives into all the aspects that make Ferrari so successful and unique. Please enjoy this Business Breakdown of Ferrari.

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Show Notes

(00:02:31) - (First question) - An introduction to the numbers behind the Ferrari brand

(00:04:26) - Exploring Ferrari's roots to understand the impact on the brand's present-day business landscape

(00:07:06) - Enzo Ferrari’s dedication to the company extended to the location of his house

(00:07:50) - A look at the brand’s racing heritage over the last 75 years

(00:13:04) - A unique way of structuring a marketing budget, wholly focused on F1

(00:17:51) - Ferrari's restraint in capitalizing on the SUV market to uphold their brand identity

(00:21:40) - A look at the product portfolio and how they cultivate exclusivity for their “collectors”

(00:23:51) - A unique buying experience, how existing Ferrari owners become frequent buyers

(00:26:50) - How Ferrari sets itself apart from its competitors

(00:29:20) - An overview of Ferrari’s financials

(00:35:21) - Alternative strategies beyond volume growth to uphold scarcity without compromising the brand's prestige

(00:36:40) - A look at other segments of the business like fashion

(00:38:44) - The business’ cost profile and its significant investment in R&D

(00:41:27) - Ferrari’s approach to electrification and hybrid cars

(00:48:31) - Comparing electrification and luxury watchmakers during the quartz crisis

(00:52:39) - Looking at Ferrari’s future and incremental evolution

(00:54:47) - Lessons learned from studying Ferrari